Medigap, An Employer Group Health Option

One of the innovations within the Medicare program is the addition of Medigap policies. Medigap is designed as a separate insurance supplement to Medicare and pays some of the health care costs that are not covered by Medicare. Some Medigap insurance provides additional benefits beyond what Medicare covers.

Medigap plans are sold by insurance companies and are required to follow all related federal and state laws and are sold under specified guidelines:

Medicare Parts A and B must be in force to qualify for a Medigap plan. Medicare Part A is free and Part B carries a monthly premium. Medigap supplements both parts.
Plans must be “standardized.” In other words, these plans must provide a standard set of benefits and have “Medical Supplemental Insurance” clearly printed on the policy.
Spouses must purchase separate Medigap insurance because their coverage is attached to their individual Medicare accounts.
In many circumstances, insurance companies cannot refuse coverage due to preexisting conditions.
As long as the premium is paid, the coverage is renewable.

It is important to distinguish between Medigap and Medical Advantage Plans. Medigap supplements Medicare while a Medical Advantage Plan provides a means to get Medicare benefits. A person covered by a Medical Advantage Plan cannot purchase Medigap coverage.

Purchasing a Medigap Plan

There are several critical issues in the Medigap program surrounds that consumers need to understand. Medigap plans do not cover:

The easiest and most advantageous time to enroll in Medigap is during the Medigap Open Enrollment Period. During this time frame, an application cannot be denied because underwriting is not permitted – even if the applicant has a preexisting illness. Coverage must also be provided to persons with a “guaranteed issue right.” A guaranteed issue right covers certain health care policies that change in some way such as losing coverage under another Medicare related policy. Under some conditions, Medigap policy holders have to wait six months before a preexisting condition is covered.
Medigap rates are another major consideration because rates do vary with insurance issuers and the types of policies they offer. The three most common types of rate structuring are:

Community rated – Under this structure age is not considered. The age covered persons enter at, regardless of age, is the same.
Issue rated – These rates vary with the entry age of individuals and remain constant.
Attained age – This type of coverage sets the premium when coverage begins and increases over time as covered individual’s age.

There are at least two more detailed and informative sources of information on Medigap insurance. One source is online at http://www.cms.gov/Medicare/Health-Plans/Medigap/index.html?redirect=/medigap/ and in a publication titled “Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare.” This publication, along with several other relevant publications can be viewed at the website provided above.